David Levi-Faur - Regulatory Capitalism & the Reassertion of the Public Interest.pdf

8/12/2019 David Levi-Faur - Regulatory Capitalism & the Reassertion of the Public Interest.pdf

1/23

Updated 29 august 08

Regulatory Capitalism & the Reassertion of the Public Interest

Neo-liberalism was supposed to lead to deregulation, privatization, commercialization

and consequently also to the retreat of the state and the shrinking of the public sphere.

Paradoxically, in many spheres and across many countries it seems to result in more

regulation and even in regulatory explosion (Ayres & Braithwaite, 1992; Kagan,

1995; Braithwaite & Drahos, 2000; Ruhl & Salzman, 2003; Levi-Faur, 2005;

Braithwaite, 2008; Ahdieh, 2006). This development may reflect the reassertion of the

public sphere, albeit through new means involving regulation and regulatory

governance rather than centralized service provision. The expectation (and fear on the

part of some) of an ossification of regulation did not materialize, even in countries

such as the United States and Britain, where neo-liberalism was most powerful

(McGarity, 1992; Yackee & Yackee, 2007; Page, 2001). A new global order of

regulatory capitalism is emerging, where the state is restructuring itself as a regulator

of social, economic and political life. This new order opens new avenues for social

and political control over the economy (Cutler, Porter and Haufler, 1999; Buthe,

2004; Porter and Ronit, 2006).

At the same time as the contours of a new order are coming into view, the limits of

policies of privatization and commercialization are becoming clearer. The promise of

better economic performance was only partly fulfilled. While inflation has been

defeated since the late 1980s, global economic growth is slower than in the heyday of

the interventionist state and of Keynesian economic policies. Indeed, the economic

policies of successful newly industrialized countries such as Taiwan, South Korea and

most recently China hardly conform to the free-market, laissez-faire model (Weiss,

1999; 2003). Climate change and other environmental risks suggest that current

commercial practices and the economic rationale of the free market lead to

unsustainable development. This chapter is concerned with both the limits of

privatization as a program for economic prosperity and the unintended consequences

of the regulatory explosion amidst neo-liberalism.

Not all regulations enhance the public interest or are even intended to do so, but all

regulation enhances and extends the public sphere by making the private public and


2/23


by making the implicit and the normative formal. To regulate is also to define what is

acceptable and legitimate for public action. That regulation can take different forms

and serve many masters is already reflected in the debate between opponents and

proponents of private-interest and public-interest theories of regulation (for an

updated comprehensive overview, see Morgan & Yeung, 2007). From a private-

interest perspective, regulation may legitimize public programs that serve the few at

the expense of the many; it can serve as a mask for policy actors and institutions that

in effect rob or marginalize the weakest sections of society. Yet at the same time, as

public-interest theories emphasize, regulation can serve as an effective governance

tool that enhances public welfare, corrects market failures and reduces social risks.

The debate about the origins and consequences of regulation is still a central focus of

social scientists, and no conclusive answer to the question of whom it serves is yet

available. Regulatory regimes are not only ever-evolving political constructions; they

also vary in design and purpose across the many issues and sectors they govern. This

chapter therefore offer some insights into them rather than to offer conclusive

answers. Can regulation stop, restrain or accommodate the tide of materialization and

individualization in social and political life? Can states reassert themselves through

the design and supply of regulatory frameworks? Can regulation serve as a critical

component of the policies, strategies and institutions that check and balance the risks

of global capitalism? If so, would and should regulation be grounded in state

authority or civil arrangements or a hybrid of the two? Finally, are we experiencing a

shift of regulation from one arena (e.g., the local) to another (e.g. the global)?

In dealing with these issues, this chapter suggests that states are reassertingthemselves in the delivery of regulatory frameworks that reduce global risks and

processes of materialization in the social and legal spheres. However, this reassertion

does not necessarily or primarily involve renationalization or direct delivery by public

monopoly. Instead, it involves regulatory reform and regulatory expansion.

Regulation is one important manifestation of the reassertion of the state. This view is

often expressed in the literature with reference to the rise of the regulatory state

(Majone, 1994; Loughlin & Scott, 1997; McGowan & Wallace 1996; Moran, 2002).

Yet, as suggested here, the notion of the regulatory state hardly reflects the public


3/23


potential of regulation. What I call for, therefore, is a reassertion of the regulatory

state and the regulatory society alike in order to nurture, strengthen and expand the

public sphere. This expansion cannot be understood, and indeed cannot be completed,

without attention to the creation of new arenas of regulation beyond the state. This

expansion may result in the creation of hybrid and multi-level governance networks of

both state and civil society actors. These regulatory networks often expand in tandem

and create positivesum effects of more regulation and a race to the top rather than

deregulation and a race to the bottom (D. Vogel, 1995; Ahdieh, 2006). Thus, from a

regulation perspective, any reassertion of the state is manifested through three

channels: first, and mainly, the deployment of regulatory instruments rather then the

direct delivery of public services; second, civil regulation, where society and state

collaborate and compete at the same time; and third, global and regional regulation

that extends the reach of the nation state rather than replaces it.

The questions raised here are discussed with reference to forms of regulatory

governance in the telecoms and food sectors. We discuss the extent to which

regulation can indeed offer an acceptable solution to the problems associated with

economic globalization, privatization and commercialization. The discussion

proceeds as follows. The first section compares the transformation of governance in

the telecoms and food industries. These industries provide the empirical cases in light

of which we assess the reassertion of the public sphere. The second section focuses

on the reassertion of the regulatory state in the telecoms and food industries. The third

section focuses on the same process from the point of view of the reassertion of public

interests through civil regulation. The fourth section brings civil regulation and state

regulation together to demonstrate that a new global order of regulatory capitalism is

emerging and is creating the conditions for a reassertion of the public interest in theface of privatization, commercialism and economic materialism in national and global

arenas. The chapter concludes with a summary of the arguments and the findings of

the chapter.


4/23


I. The Governance of Food and Telecoms

To study the governance structures of the telecoms and food sectors is to study

governance structures that deal with (a) distinctly different regulatory challenges

mainly economic in the case of telecoms and mainly safety issues in the case of food

which (b) have conflicting dynamics in terms of the globalization of their

governance structure telecoms were mostly under government ownership and

subject to a strong intergovernmental international regime for most of the 20th

century, while the food supply was mostly privately produced and was not subject to a

strong international regime for the governance of safety until very recently; and (c)

the extent to which they have experienced processes of privatization and deregulation

since the 1980s (as we will see, privatization and deregulation are applicable mainly

to telecoms, and much less so to food safety).

The governance of the telecoms industry focuses mainly on the technical

compatibility of networks and equipment, on economic rules for interconnection, and

on the degree, scope and form of market openness. While telecoms governance is one

of the earliest examples of international institutionalization, the industry hardly

featured in the public or international arena before the mid-1980s (Jacobson, 1973;

Noam, 1992).1 Since then, however, there has been growing recognition of the

importance of telecommunications as the backbone of all other national and global

infrastructures. At the national level, telecoms investment is perceived a key

component in the development of the modern economy and in the creation of the so-

called information society and information economy. Telecoms has thus moved

to the center of attention of economic policymakers. The framing of telecoms in this

process of agenda expansion occurred mostly in economic terms. Only since the1990s have issues of health risks (e.g. radiation from cellular equipment and

antennas), equity (universal access to the information highway) and social risks

(gambling, terror, pornography and child safety) become dominant issues shaping the

governance structure of the telecoms industry.

Unlike with telecommunications, the governance of food safety issues is focused

largely on the quality attributes of food and the health effects of the production,

processing, distribution and consumption of food. The hazards of food are


5/23


qualitatively different from those of telecoms, even without the recent food scandals

and controversies concerning the consumption of genetically modified (GM) food and

the applications of nanotechnology in the production of food. According to the World

Health Organization, up to one third of the population of developed countries is

affected by food-borne illnesses each year. The poor are the most vulnerable, and

food and waterborne diarrhoeal diseases, for example, are leading causes of illness in

less developed countries, killing an estimated 2.2 million people annually, most of

them children.2

Given the data on food-borne illnesses and deaths, one would expect food safety to be

a major cause for concern at the global, national and regional levels. This is, however,

hardly the case. National, regional and global governance structures are more

developed and institutionalized in telecoms than in food. Food governance was slow

to develop administrative institutions; and when such institutions were established

they were entrusted to agriculture administration rather than health administration

(and therefore producer rather than consumers interests). This was the case from the

mid-19th century until very recently. The focus of regulation at the national level was

largely on issues of food adulteration rather than attempts to promote best practice in

processing and marketing food. Thus, for example, in the United Kingdom a select

parliamentary commission was set up in the mid-19th century to consider the problem

of adulterated food. The committees recommendation led to the Adulteration of Food

and Drink Act 1860, which prohibited mixing injurious ingredients with food. The

food safety acts that followed in 1928 and 1938 extended the prohibitions so as to

include minimum compositional standards in essential food. A notable event in the

history of food safety regulation in Britain is the obligation, since 1939, to report

cases of food poisoning (Hardy, 1999). In Continental Europe leadership in food-standard setting was in the hands of Austro-Hungarian policymakers, who initiated in

1891 the Codex Alimentarius Austriacusto regulate the food trade in the empire. The

Austrian Code is considered as one of the strictest; it had an informal status until it

was incorporated into Austrian law, which happened as recently as 1975. An

important turning point in France was the establishment of the Socit Scientifique

dHygine Alimentaire in 1904 and the passage of the Food Adulteration Act 1905

(Zylberman, 2004, p. 1). Denmark made meat inspection mandatory only in 19036,

after the family of a member of the Danish parliament was infected with trichinae.


6/23


Development was not always linear and toward stricter regulation. Germany repealed

the stricter regulations drawn up by Prussia in 1900, and veterinarians had come to

doubt the cost-effectiveness of inspections based on microscopes (Zylberman, 2004,

p. 9). Modern systems of food regulation originated in the United States in the late

19th century, when state and local governments began to enact food regulation. In

1879 the first general food-safety legislation was introduced in Congress but failed to

pass. Repeated attempts over the next 25 years eventually succeeded in the form of

the Pure Food and Drug Act 1906 (Law, 2003; Scheuplein, 1999). As in Europe, the

law emphasized adulteration and the obligation to inform the consumer, but it also

upgraded the administrative capacities and status of the Bureau of Chemistry in the

Department of Agriculture, creating the predecessor of the current regulatory agency,

namely, the Food and Drug Administration, which for a long period was the only

autonomous food-safety regulatory agency in the world.

While governments were only gradually and hesitantly moving into the domain of

food safety, they adopted a much more proactive approach in telecoms. Most

European countries nationalized their telegraph industries and, later, also their

telephone industries. Germany nationalized telephony in 1878, followed by France

(1889), Switzerland (1880), Austria (1895), Belgium (1896) and Britain (1911). State

ownership of the telecoms industry was widespread, with only very few exceptions

(Schneider, 1997; Levi-Faur, 2003b). The rise of neo-liberalism in the late 1970s had

a major impact on telecoms but hardly any on food safety. The divestiture of AT&T

in 1984 pushed the old monopolistic (yet private-ownership) domestic regime in the

United States into a state of flux, and the implications of those changes were

gradually felt across the world. A similar development in Britain led to the

privatization of the old colonial telecoms provider, Cable and Wireless, in 1981, and

to the partial privatization of British Telecom and the establishment of an autonomous

regulator in 1984. The British move seems to prove the feasibility of competition for

Europeans and for countries well beyond Europe that were tuned to British

developments. The incentives for regulatory emulation were created as soon as it

became evident that competition was possible and would bring significant benefits for

consumers in terms of both the cost and the quality of service. Other governments

increasingly followed the American path and the British example, and acted to

privatize telecoms operators and to regulate monopoly power using sector-specific


7/23


agencies. Privatization became intertwined with the establishment of regulatory

authorities. Yet regulatory agencies proved to be even more popular than

privatization. Worldwide, only 90 countries have privatized some of their telecoms

operators, but 120 countries have established regulatory agencies (Levi-Faur, 2003a).

This radical regime change in telecoms was not matched in food safety. While the US

Federal Drug and Food Administration faced strong criticism (especially on drug

issues), changes at the domestic level were hardly radical. Certain controversies about

risk assessment that affected food additives were resolved in the 1970s and 1980s in

the courts, but changes in the food-safety regime were hardly felt. More changes

were evident in the United Kingdom, especially after the 1980s. Yet these changes

were basically the results of the failure of the domestic food regime rather than of

neo-liberal or even European challenges. In October 1984 a lengthy series of food

safety scares and crises to do with food additives started in Britain, to be rapidly

followed by, for example, botulism, pesticides, veterinary medicines, salmonella, BSE

and GM foods (Ansell & Vogel, 2006). The responses, although for a long period

slow and hesitant, were in the direction of stricter and more extensive regulation

(Millstone & van Zwanenberg, 2002).

The development of governance structures and problem definition thus differs

considerably as between telecoms and food. While telecoms governance was framed

as an investment and competitiveness issue, food governance in the 20th century was

about the management of safety risks. While governments are said to have privatized

and deregulated the telecoms industry, it is clear that they are reasserting greater

control than ever over food-safety issues. The historical context and the regulatory

problems of reassertion are discussed from a state-centered perspective in the nextsection.

II. The Regulatory State and the Reassertion of the Public Interest

In order to understand the reassertion of the public interest in the telecoms and food

industries through the machinery of the state, we need first to clarify the notion of the

rise of the regulatory state (Majone, 1994; Moran, 2002; Loughlin and Scott 1997;

McGowan and Wallace, 1996). The term regulatory state, which has proved


8/23


especially popular since the 1990s, suggests [that] modern states are placing more

emphasis on the use of authority, rules and standard-setting, partially displacing an

earlier emphasis on public ownership, public subsidies, and directly provided

services. The expanding part of modern government, the argument goes, is

regulation (Hood et al., 1999, p. 3). The regulatory state invests in rule making,

monitoring and enforcement at the expense of other types of policy including service

provision, subsidies and, more generally, redistribution. Students of political economy

and public administration have found the notion of the regulatory state useful in

conveying important aspects of political and economic reform worldwide (Jordana,

Levi-Faur & Fernandez, 2008). At the same time study, research and consultancy

concerning regulatory reform have become a growth industry.

To what extent does the concept of the regulatory state capture the changes in the

governance of telecoms and food industries? One way to answer this question is to

examine the development and diffusion of regulatory agencies as an indicator of the

spread of the regulatory state as an institutional order. While the number of regulatory

agencies in the United States has not grown since the mid-1970s, such agencies have

become popular elsewhere in the world. A recent survey of the establishment of

regulatory agencies across 16 different sectors in 63 countries from the 1920s through

to 2007 reveals that it is possible to find an autonomous regulatory agency in about 73

percent of the possible sector-country units that were surveyed (Jordana, Levi-Faur &

Fernandez i Marin, 2008). The number of regulatory agencies rose sharply in the

1990s. The rate of establishment increased extremely dramatically: from fewer than

five new autonomous agencies per year from the 1960s to the 1980s, to more than 20

agencies per year from the 1990s to 2002 (rising to almost 40 agencies per year

between 1994 and 1996). Probably more than anything else, it is the establishment ofthese agencies that makes the regulatory state an attractive concept for social

scientists.

The general pattern of commonalities and variations that is evident from the aggregate

data on economic and social regulation is also evident from a more detailed study of

regulatory agencies in the telecoms and food sectors. Let us first examine more

closely the telecoms sector. The data here reveal that 57 out of the 63 countries

surveyed established regulatory authorities to govern the sector (China, Cuba, Israel,


9/23


Iran, Bangladesh and Vietnam did not established agencies). The first countries to

establish a telecoms regulatory authority were the United States (1934), Costa Rica

(1963) and Canada (1968). The turning point in the diffusion of regulatory agencies

was, however, the establishment of Oftel in 1984 by the British government in

conjunction with the privatization of British Telecom. In that decade two more

countries established regulatory authorities Chile in 1985 and Finland in 1987. Most

of the countries, however, established regulatory authorities in the 1990s, including

five in 1995, seven in 1996 and six in 1997. In food safety, only 32 countries out of

the 63 surveyed have established a regulatory authority. The first to establish an

agency in this field was the United States in 1927, followed by Sweden in 1972. Two

decades later, in 1991 Australia and New Zealand established food safety agencies,

followed by Argentina (1992) and Columbia (1993). Denmark decided to establish a

regulatory authority in 1997, followed by Brazil, France and Ireland in 1998, and

Greece and Britain in 1999. Six additional European countries have established

regulatory agencies since 2000: Belgium and Portugal in 2000, Finland and Spain in

2001, and the Netherlands and Germany in 2002; and Japan established one in 2003.

While the regulatory agency model was adopted by 90 percent of the 63 countries

surveyed in telecoms, it was adopted by only 51 percent of the countries surveyed in

food safety (see Figure 1).

Figure 1: The Rise of the Regulatory State in

Telecoms and Food Safety

(N=63)

0

10

2030

40

50

60

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

numberofagencies

Food Safety Agencies Telecoms Agencies


10/23


Beyond the expansion of the agency model, it is also notable that the regulations that

govern the telecoms and food-safety industries are more explicit, more detailed and

more demanding than ever before. The privatization of telecoms allowed or

necessitated the expansion of regulations, which promises to generate extensive

academic, legal and policy discussions in the years to come. Thus, for example, the

new Telecom Act in the United States brought the number of pages of primary

legislation for telecoms to more than 300. The number of pages in the official

compendium of Federal Communications Commission (FCC) decisions and

proceedings has nearly tripled since the passage of the new act in 1996. Membership

of the Federal Communications Bar Association increased by 73 percent between

1995 and 1998 (Sidak, 2003, p. 213). Developments in other countries have followed

the same trajectory of freer markets, more rules (S. Vogel, 1996).

A similar expansion is observable in the number of food safety laws and regulatory

controls as well. More important, if until the mid-1990s the development of food

safety legislation was mainly reactive, as part of governments crisis management

agenda (Jouve, 1998), the current approach is more holistic and proactive. Thus, ad

hoc interventions that are focused on specific contaminants posing immediate hazards

are being replaced in many countries with general regulatory frameworks that are

usually more demanding than ever before. General legislative frameworks have

therefore been updated in countries all over the world, probably starting with the Food

Safety Act 1990 in Britain but now including most if not all European Union

countries (The General Food Law Regulation 178/2002). Outside Europe similar

moves can be noted in Japan (Food Safety Basic Law 2003), India (Food Safety and

Standards Act 2006), Australia and New Zealand (Food Standards Australia New

Zealand Act 1991), and Nigeria (Decree 19 of 1993 as amended by Food, Drugs andRelated Products (Registration) Decree No. 20 of 1999). It is very likely that these

regulatory frameworks have many regulatory gaps and that many have shortcomings

in terms of both excessive regulation and enforcement deficits. Compliance may also

be an important issue, but the literature on the political economy of food safety is

increasingly concerned not with deregulation but with by how much the control of

and investment in food safety should be increased.


11/23


Our analysis so far suggests that there are some grounds for optimism with regard to

the reassertion of the state in the fields of telecoms and food safety. This reassertion

does not involve public ownership but stronger and more careful design of regulatory

structures. But states are embedded in their societies; we therefore move to civil

regulation and its role in telecoms and food safety.

III. Civil Regulation and the Reassertion of the Public Interest

When we discuss the public interest we should also consider the role of civil society

because there is no public sphere without civil actors and there is no reassertion of the

state without the reassertion of civil society. Civil actors, business included, are often

associated with advocacy (e.g. lobbying) and service provision (e.g. replacing the

state in the provision of welfare), but in our areas of study they also produce, monitor

and enforce regulation. The concept of civil regulation aims to capture this evolving

feature of civil politics. But what is civil regulation? It is a relatively new concept in

the field of regulation. It refers to the institutionalization of voluntary global and

national forms of regulation through the creation of private (non-state) forms of

regulation intended to govern markets and firms (D. Vogel, 2005; 2006). Civil

regulations attempt to embed international markets and firms in a normative order that

prescribes responsible business conduct. What distinguishes the legitimacy,

governance and implementation of civil regulation, Vogel tells us, is that it is not

rooted in public [i.e., state] authority. Operating beside or around the state rather than

through it, civil regulations are based on soft law rather than legally binding

standards: violators are subject often to market rather than legal penalties (D. Vogel,2006, pp. 23). Market penalties should be understood here not only as direct and

immediate economic outcomes, but also as penalties that are related to the standing

and reputation of the corporation and its managers and employees. Because penalties

can be high, even if they are not based on legal norms and state enforcement, it might

be useful to distinguish between voluntary regulation and civil regulation. While

the two notions retain a close affinity, civil regulation, unlike voluntary regulation,

may, at least in principle, possess coercive aspects. Civil regulation includes old and

traditional forms of self-regulation but goes beyond it to include third-party regulation


12/23


where various gatekeepers act as regulators (rule setters, rule monitors and rule

enforces) of public standards (Kraakman, 1986; Grabosky, 1995).

How relevant and important are civil forms of regulation in the governance of the

telecoms and food industries? Our empirical observations reveal that they are relevant

and important at least as legitimacy and reputational mechanisms, but that they are

more vibrant and more visible in food safety than in telecoms. Unfortunately the

literature on civil regulation in the telecoms industry is case- and country-specific,

and there is little effort to conceptualize its scope and assess its development, not to

mention measuring it (but see Doyle, 1997; Stuhmcke, 2002). Every empirical

assessment of the development of civil regulation in this sphere is therefore arbitrary

and provisional. Yet it seems that Anglo-Saxon democracies tend to use it more

extensively than Continental European democracies, and that in telecoms the

tendency to set up civil regulatory bodies is most often related to consumers

information and consumer complaints. This is the case with the Telecoms Industry

Ombudsman in Australia and Britain (TIO and OTELO respectively), the Premium

Rate Services Regulator in Britain and Ireland (PhonepayPlus, REGTEL). Another

self-regulatory arrangement covers the direct mail industry. In this case associational

bodies (TPS and FPS) require direct marketing companies to avoid telephone and fax

solicitations. Standards and systems architecture are also an area where self-regulation

is widespread (Brunsson & Jacobsson, 2000; Lessig, 1999). Civil regulatory bodies

are widespread in the advertisement field and in effect exist in all countries (e.g. the

Irish Advertising Standards Authority, the Italian Istituto dellAutodisciplina

Pubblicitaria and the Dutch Stichting Reclame Code). Finally, self-regulatory

arrangements cover internet governance, mainly concerning issues of harmful andillegal content (Price & Verhulst, 2005). Beyond these telecom-specific bodies, self-

regulation also operates through more general mechanisms that are not industry- or

sector-specific, such as corporate social responsibility programs.

Civil regulation is an important component also of the governance of the food

industry. While the dominant form of civil regulation in the telecoms industry is self-

regulation, the dominant civil regulation in food-safety issues takes the form of


13/23


private food-standard and third-party certification. These private regulatory

instruments tend to cover both food safety and food quality. Reardon and Farina

(2002) report that during the 1990s businesses rapidly built up an array of private food

standards in the context of fiercely competitive markets. These private standards, they

argue, have sometimes filled gaps in public standards, especially for safety, but at the

same time have been used to differentiate products and to build reputations for both

quality and safety. The authors explain the emergence of private agrifood standards

by reference to, among others, the market incentive to create such standards on the

one hand and the capacity of large marketers of food to formulate and implement

them on the other (Reardon & Farina, 2002, p. 415).

Civil standards and third-party certification are also very common at the global level,

that is, in the international food market. One notable example is GLOBALGAP

(known as EurepGap before September 2007). GLOBALGAP is a private-sector body

that sets voluntary standards for the certification of agricultural products. It brings

together agricultural producers and retailers who want to establish certification

standards and procedures for Good Agricultural Practices (GAP). Certification covers

the production process of the certified product from before the seed is planted until it

leaves the farm. It covers crops, livestock and aquaculture, and involves more than

80,000 certified producers in no fewer than 80 countries. Interesting enough is the

role of third-party regulators as the gatekeepers of quality and safety (Kraakman,

1986; Ribstein, 2005, pp. 56). In the context of the GLOBALGAP regime, the

accreditation of the 80,000 or so producers is delegated to independent certifiers. In

this process these certifiers are the third parties that provide the accreditation for

producers after going through the GLOBALGAP accreditation process themselves.

It is tempting to characterize GLOBALGAP as a voluntary organization, but this

would be to turn a blind eye to apolitical, non-state forms of power. GLOBALGAP

was established by retailers in an increasingly concentrated retail market which allows

retailers to exert significant control over producers. These retailers are generally

located in the North and are organized as giant corporations, while the producers often

come from the South and are organized in family farms. Better food safety in the

North may come at a high price to the South. Civil regulation does not necessarily

mean voluntarism. In the food sector retailers exercise significant power over other


14/23


parts of the food industry, and their power explains much of the convergence of

producers on stricter standards. Indeed, GLOBALGAP is not directly visible to

consumers, nor does it attract the direct scrutiny of governments. While its advocates

suggest that it leads to an upgrade of food-safety standards and reduces both red-tape

and compliance costs, its opponents point out that GLOBALGAP is taking over state

functions, and is a form of private government that is neither accountable to the public

nor transparent to important stakeholders (Campbell, 2005; 2006; Freidberg, 2007;

Guthman, 2007).

While we find that civil regulation is relevant in both the telecoms and the food

industries, it is in food safety that it captures the imagination of the policy community

and scholars alike. This is not to suggest that civil regulation is an ineffective form of

governance either in telecoms or in food safety. We should also be careful not to

suggest that civil regulation is more effective in one sector than another. Instead, it is

suggested that there are supply and demand pressures for civil regulation in both

industries and that these pressures extend the public sphere. Beyond the extension of

the public sphere to non-tatist forms of governance, we should explore not the

effectiveness of civil regulation as such but more generally the ways it affects the

legitimacy of the regulatory regime, the mutual trust of the actors and the trust

between them and the public.

IV. The Regulatory Hybrids of Regulatory Capitalism

While analytically it is tempting to think of state and civil regulation as conflicting

and alternative forms of regulation and as two distinct and independent types of

public sphere, this is not necessarily either an accurate or the most insightful way to

think about them. More often than not, state regulation and civil regulation appear in

tandem within hybrids of privatepublic action as well as within national and global

systems of governance. The mutual consolidation and mutual enforcement of the

regulatory state and regulatory society characterize and signify the new order of

regulatory capitalism. This order is defined, sustained and legitimized by the

expansion in the number and the scope of rules and the expansion of various activities

that are connected with rule expansion, such as rule making, rule monitoring and rule

enforcement. The dynamics and content of such rule activity are shaped by the


15/23


interaction of varying types of civil and state regulation and by the multiple forms and

degrees in which the national is embedded in the global. By focusing on this two-

dimensional interaction in telecoms and food safety, we are able to demonstrate the

extent to which various hybrids constitute current forms of regulatory governance.

We have found so far that regulatory governance in telecoms is manifested in

relatively strong forms of state-centered regulation and weak forms of civil regulation.

But how do the national and the global interact in telecoms governance? The findings

suggest that global governance and national governance have co-expanded.

Governance structures at the global level are also very elaborate if we consider the

early 19th-century origins of the International Telecommunication Union. Recent

changes include an expansion of this framework through the World Trade

Organization and a bigger voice and role for business in the global regime than in the

past. Yet this is not necessary reflected in a hollowing out of the state. National

regulatory structures in telecoms are more developed, elaborate and effective than

ever before. The distinction between the national and the global, like that between

civil regulation and state-centered regulation, is relatively clear when compared with

the situation in food safety.

Under tatist regulatory capitalism, civil regulation is weak and state regulation is

strong, and the distinctions between the global and the national are relatively clear.

This represents the adaptation of the Westphalian order to the regulatory arena, and in

particular its adaptation to the realities of multi-level governance. In the literature on

regulation, tatist forms of regulation are often described as systems of command and

control with prescriptive types of rule. Prescriptive rules tell regulated entities and

individuals what to do and how to do it, and tend to be highly particularistic in

specifying required actions and the standards to be adhered to (May, 2007, p. 9). This

variant of regulatory capitalism usually enjoys a strong capacity to impose sanctions,

as well as clear-cut lines of responsibility and thus accountability. Yet these

advantages come at a price: strict authoritarianism, unreasonable rule and capricious

enforcement practices impose needless costs and generate adversarial relations

between regulators and regulatees.


16/23


Moving from telecoms to food safety, we again find expansion and relevance of both

state and civil forms of regulation. While state-centered institutions are expanding

more slowly than in telecoms, civil forms are expanding faster and more strongly in

food safety. Yet we do not recognize a zerosum game between these forms of

regulation. Instead the process is one of the co-expansion of both state and civil forms

of regulation, and this co-expansion is more visible in food safety than in telecoms,

where civil regulation is comparatively marginal. The interaction between the global

and the national in food-safety issues is a product of the relatively fast expansion of

supranational governance institutions in food safety, especially when compared with

the past. Nothing comparable to the International Telecommunication Union (ITU) in

magnitude and importance exists in the field of food safety. The regulatory structure

is visibly expanding at the national level, however, and thus we can suggest that the

regulatory structures are co-expanding. The emerging structure of governance might

best be called a corporatist form of regulatory capitalism.

Corporatist regulatory capitalism emerges from the interaction of strong forms of both

civil regulation and state regulation. Various forms of the corporatist regulatory order

can be envisaged, including co-regulation, where responsibility for regulatory design

or regulatory enforcement is shared by state and civil actors. The particular scope of

cooperation may vary as long as the regulatory arrangements are grounded in

cooperative techniques and the legitimacy of the regime rests at least partly on

publicprivate cooperation. A second form is that of enforced self-regulation, where

the government would compel each company to write a set of rules tailored to the

unique set of contingencies facing that firm. A regulatory agency would either

approve these rules or send them back for revision if they were insufficiently

stringent (Ayres & Braithwaite, 1992, p. 106). Rather than the government enforcing

the rules, most enforcement duties and costs would be internalized by the regulatee,

which would be required to establish its own independent compliance administration.

The primary function of government inspectors would be to ensure the integrity and

transparency of the work of the compliance group of theregulatees. State involvement

would not stop at monitoring, however. Violations of the privately written and

publicly ratified rules would be punishable by law (Ayres & Braithwaite, 1992).


17/23


A third form of corporatist regulatory capitalism involves systems of meta-regulation.

The notion of meta-regulation is closely related to the notion of enforced self-

regulation as formulated above; however, unlike enforced self-regulation, it allows the

regulateeto determine its own rules. The regulatory role of the state is confined to the

institutionalization and monitoring of the integrity of the work of the compliance

group of the regulatees (Grabosky, 1995; Parker, 2002; Morgan, 2003, p. 2). Finally,

a form of regulatory corporatism emerges from multi-level regulation. Here

regulatory authority is allocated to different levels of territorial tiers supranational

(global and regional), national, regional (domestic) and local (Marks & Hooghe,

2001). There are various forms of multi-level regulation depending on the number of

tiers that are involved and the particular form of allocation. Regulatory authority can

be allocated on a functional basis (whereby it is allocated to different tiers according

to their capacity to deal with the problem) or on a hierarchical basis (where supreme

authority is allocated to one of the regulatory tiers); alternatively, it may simply be a

product of incremental, path-trajectory processes (where the regime is the result of the

amalgamation of patches, each designed to solve a particular aspect as it appeared on

the regulatory agenda). While much of the discussion on multi-level governance

(which is a broader term than multi-level regulation) focuses on the transfer of

authority between one tier and another, one should note that the overall impact of

multi-level regulation can be that of accretion. Indeed, the possibility that multi-level

regulation may involve the co-development of regulatory capacities in different tiers

is rarely recognized.

All in all, the perspective of regulatory capitalism suggests that there are various ways

in which it is possible to reassert the public interest in an era of regulation. These

ways might best be captured through the many forms and types of interaction of civil

and state regulation at both the national and the global level and by better appreciation

of the fact that regulation and rule making is expanding, indeed exploding.

V. Conclusions: Regulation and the Reassertion of the Public Sphere

This chapter suggests that neo-liberalism has not led to the retreat of the state in the

telecoms and food industries. A new order of regulation is mediating and enforcing


18/23


socially and politically acceptable forms of capitalism. In this new order, best

described as regulatory capitalism, new forms of governance open new opportunities

for the reassertion of the state, and more generally also for the reassertion of the

public interest. Regulation and capitalism are increasingly intertwined, and new forms

of capitalism are associated with new forms of regulation (Braithwaite & Drahos,

2000; Lessig, 1999; Eisner, 2007). Regulation not privatization and deregulation

best captures the political aspects of the new emerging order. Regulatory expansion is

creating a thick institutional design that might shape the governance of capitalism in

ways that cannot be anticipated or controlled in advance. While some regulations,

advertently or inadvertently, work against the public interest, all regulations extend

and strengthen the public sphere, simply by shrinking the private, the normative and

the informal, and by extending the public and the formal aspects of policy and

politics.

In order to understand the dynamics of global governance and make the most of these

new options, we need to take into account three major developments. First, we need to

understand the emergence and expansion of the regulatory state as a major feature and

facet of the new system of governance. This is well expressed in the telecoms sector,

where the institutional innovation of the regulatory agency was highly popularized

across countries and regions (Levi-Faur, 2003b; 2005). Indeed, regulatory agencies

are now common in telecoms worldwide. They are less evident, however, in food

safety. Here, convergence on independent agencies is still in its early days, and the

agencies that have been established seem to be less autonomous than those in

telecoms. The trend, however, is clearly toward the reassertion of the state and the

revision rather than the demise of the regulatory structure. Privatization and

deregulation miserably fail to capture even some of the aspects of the dynamics of

governance in food safety. While it may well be the case that the regulatory

challenges are bigger than in the past and that the current regulatory structures of

many states require reform, the general trend since the late 1980s and especially in the

1990s reflects regulatory expansion rather than contraction.

A second development in the governance of present-day capitalism is manifested in

the emergence of civil regulation as an alternative, complementary and innovative


19/23


form of regulatory governance. The phenomenon is clearly evident in food-safety

issues and to a lesser extent in telecoms. While new forms of private rule setting and

third-party regulation are expanding in food safety, in telecoms civil regulation is

mostly manifested in the traditional form of self-regulation. Similarly, whereas civil

regulation is dealing with issues of consumer complaints about the terms of service in

food-safety regulation, civil regulation is being extended over major elements of the

production, processing and marketing of food. In both cases, however, the dynamics

is not of deregulation or a shift of responsibility from state to civil society but rather

of the expansion of both.

Third, the interaction between state regulation and civil regulation promises to create

hybrids of regulatory governance and varieties of regulatory capitalism. Both civil

and statist forms of regulation grow very fast, and they grow at both the national and

the global level. It is only through the interaction of the different dimensions and

arenas of regulation that we can hope to capture the essence of regulatory capitalism.

It is also should be clear by now that the strength, effectiveness and legitimacy of

regulation depend not only on national and state-centered structures but also on civil,

global and regional structures. Indeed, the growth of these additional layers of

regulation is one of the most important aspects of the governance of both the telecoms

and the food industries. These observations echo and confirm earlier and more

sweeping suggestions that the way capitalism is organized and governed is changing

and that this change involves the creation of new regulatory structures (Rosenau &

Czempiel, 1992; Braithwaite & Drahos, 2000; Slaughter, 2004). Thus, in a study of

environmental regulation the political scientist Marc Eisner suggests that future gains

in environmental quality may be impossible without fundamentally reconsidering

regulatory design, that is, one that incorporates self-regulation, association regulation,

and standards into the regulatory system, and without thinking creatively about how

public policies can be used to reinforce incentives or compensate for their absence

(Eisner, 2007, p. 282). Robert Ahdieh (2006) asserts from a legal perspective that

cross-jurisdictional regulation creates overlaps that lead to dialogic cooperation that

may create the same hybrids that are observed in telecoms and food as well as in

Eisners study of environmental regulation. The challenge we face is to design hybrid


20/23


institutions and mechanisms of regulation and to understand their functions, strengths

and weaknesses in both theoretical and practical terms.

Bibliography

Ahdieh, B. Robert. 2006.Dialectical Regulation, Public Law & Legal Theory Research PaperNo. 06-35, Emory University School of Law

Ansell, Chris & Vogel, David.2006.Whats the Beef? The Contested Governance ofEuropean Food Safety. Cambridge, MA: MIT Press.

Ayres, Ian and Braithwaite, John. 1992.Responsive Regulation: Transcending theDeregulation Debate. Oxford: Oxford University Press.

Braithwaite, John. 2008.Regulatory Capitalism: How it Works, Ideas for Making it WorkBetter. Cheltenham: Edward Elgar.

Braithwaite, John & Drahos, Peter. 2000. Global Business Regulation. Cambridge:Cambridge University Press.

Brunsson, Nils & Jacobsson, Bengt. 2000.A World of Standards. Oxford: Oxford UniversityPress.

Buthe, Tim. 2004. Governance through Private Authority: Non-State Actors in World

Politics.Journal of International Affairs58, 28190.

Campbell, H. 2005. The Rise and Rise of EurepGAP: The European (Re) invention ofColonial Food Relations?International Journal of Sociology of Agriculture and Food13(2),619.

Campbell, H. 2006. Consultation, Commerce and Contemporary Agri-Food Systems: EthicalEngagement of New Systems of Governance under Reflexive Modernity.IntegratedAssessment 6(2), 11736.

Cutler, A. Claire, Porter, Tony and Haufler, Virginia (eds.). 1999.Private Authority andInternational Affairs. New York: SUNY Press.

Doyle. Chris. 1997. Self Regulation and Statutory Regulation. Business Strategy Review8(3), 3542.

Eisner, Marc. 2007. Governing the Environment: The Transformation of Environmental

Protection.Boulder, CO: Lynne Rienner.

Freidberg, S. 2007. Supermarkets and Imperial Knowledge. Cultural Geographies14 (3),32142.

Grabosky, P. 1995. Using Non-Governmental Resources to Foster Regulatory Compliance.Governance8, 52750.

Guthman, Julie. 2007. The Polanyian Way? Voluntary Food Labels as NeoliberalGovernance.Antipode39(3), 45678.


21/23


Hardy Anne, 1999, Food, Hygiene, and the Laboratory. A Short History of Food Poisoning inBritain, circa18501950, Social History of Medicine1999 12(2):293-311.

Hood, Christopher, Scott, Colin, James, Oliver, Jones, George and Travers, Tony. 1999.Regulation inside Government. Oxford: Oxford University Press.

Jacobson, K. Harold. 1973, ITU: A Potpourri of Bureaucrats and Industrialists. In W. Robert

Cox, and K. Harold Jacobson, The Anatomy of Influence.Yale University Press, New Haven,pp. 59101.

Jordana, Jacint, Levi-Faur, David and Fernandez i Marin, Xavier. 2008. The GlobalDiffusion of Regulatory Agencies: Institutional Emulation and the Restructuring of ModernBureaucracy. Unpublished manuscript.

Jouve, J. L. 1998. Principles of Food Safety Legislation.Food Control 9(23), 7581.

Kagan, Robert A. 1995. What Socio-Legal Scholars Should Do When There is Too Much

Law to Study.Journal of Law and Society22(1), 1408.

Kraakman, R. 1986. Gatekeepers: The Anatomy of a Third-Party Enforcement Strategy.Journal of Law, Economics and Organization2, 53104.

Law, Marc. 2003. The Origins of State Pure Food Regulation.Journal of Economic History63, 110330.

Lessig, Lawrence. 1999.Code and Other Laws of Cyberspace. New York: Basic Books.

Levi-Faur, David. 2003a. The Politics of Liberalization: Privatization and Regulation-for-competition in Europes and Latin Americas Telecoms and Electricity Industries.European

Journal of Political Research42(5), 70540.

Levi-Faur, David. 2003b. New Regimes, New Capacities: The Politics of TelecomsNationalisation and Liberalisation. In Linda Weiss (ed.), States in the Global Economy:Bringing Domestic Institutions Back In. Cambridge: Cambridge University Press, pp. 161

78.

Levi-Faur, David. 2005. The Global Diffusion of Regulatory Capitalism.Annals of theAmerican Academy of Political and Social Sciences598, 1232.

Loughlin, Martin & Scott, Colin. 1997. The Regulatory State. In Patrick Dunleavy et al.

(eds.),Developments in British Politics. Basingstoke: Macmillan, pp. 20519.

McGarity, Thomas O. 1992. Some Thoughts on Deossifying the Rulemaking Process.Duke

Law Journal41, 1384462.

McGowan, F. and Wallace, H. 1996. Towards a European Regulatory State.Journal ofEuropean Public Policy3, 56076.

Majone, Giandomenico. 1994. The Rise of the Regulatory State in Europe. West EuropeanPolitics17, 77101.

Marks, Gary and Hooghe, Lisbet. 2001.Multi-level Governance and European Integration.

New York: Rowman and Littlefield Publishers, Inc.


22/23


May, J. Peter. 2007. Regulatory Regimes and Accountability.Regulation & Governance1(1),826.

Migdal, Joel. 2001. State in Society: Studying How States and Societies Transform andConstitute One Another. Cambridge: Cambridge University Press.

Millstone, Erik & van Zwanenberg, Patrick. 2002. The Evolution of Food Safety Policy

Making Institutions in the UK, EU and Codex Alimentarius.Social Policy and Administration36(6), 593609.

Moran, Michael. 2002. Review Article: Understanding the Regulatory State.BritishJournalof Political Science 32, 391413.

Morgan, Bronwen. 2003. Social Citizenship in the Shadow of Competition: The BureaucraticPolitics of Regulatory Justification. Aldershot: Ashgate.

Morgan, Bronwen & Yeung, Karen. 2007.An Introduction to Law and Regulation: Text and

Materials. Cambridge: Cambridge University Press.

Noam, Eli. 1992. Telecommunications in Europe, Oxford and New York: Oxford UniversityPress.

Page, Edward C. 2001. Governing by Numbers: Delegated Legislation and Everyday Policy-Making. Oxford and Portland: Hart Publishing.

Parker, Christine. 2002. The Open Corporation: Effective Self-Regulation and Democracy.

New York: Cambridge University Press.

Price, Monroe Edwin & Verhulst, Stefaan G. 2005.Self-regulation and the Internet

The Hague: Kluwer Law International.

Porter, Tony & Ronit, Karsten. 2006. Self Regulation as Policy Process: The Multiple andCriss-Crossing Stages of Private Rule-Making.Policy Science39(1), 4172.

Reardon, Thomas and Farina, Elisabeth. 2002. The Rise of Private Food Quality and SafetyStandards: Illustrations from Brazil. International Food and Agribusiness ManagementReview4, 41321.

Ruhl, J.B. and Salzman, James. 2003. Mozart and the Red Queen: The Problem of Regulatory

Accretion in the Administrative State. Georgetown Law Journal91, 757850.

Ribstein, E.L. 2005. Sarbanes-Oxley After Three Years. Illinois Law and Economics WorkingPapers Series No. LE05-016.

Rosenau, N. James & Czempiel, Ernst-Otto. 1992. Governance without Government: Orderand Change in World Politics. Cambridge: Cambridge University Press.

Scheuplein, J. Robert. 1999. History of Food Regulation, In K. van der Heijden et al. (eds),

International Food Safety Handbook. New York: Marcel Dekker, pp. 64759.

Schneider, Volker. 1997. Telecommunications and the State: A Historical and ComparativePerspective.Trends in Communication3, 733.


23/23


Sidak, J. Gregory. 2003. The Failure of Good Intentions: The WorldCom Fraud and theCollapse of American Telecommunications After Deregulation. Yale Journal onRegulation20(2), 20767.

Slaughter, Anne-Maire. 2004.A New World Order. Princeton: Princeton University Press.

Strange, S. 1996. The Retreat of the State. Cambridge: Cambridge University Press.

Stuhmcke, A. 2002. The Rise of the Australian Telecommunications Industry Ombudsman.

Telecommunications Policy26(12), 6985.

Vogel, David. 1995. Trading Up: Consumer and Environmental Regulation in a GlobalEconomy. Cambridge, MA: Harvard University Press.

Vogel, David. 2005. The Market for Virtue: The Potential and Limits of Corporate SocialResponsibility. Washington, D.C.:Brookings Institution.

Vogel, David. 2006. The Role of Civil Regulation in Global Economic Governance. A paperprepared for the annual meeting of the American political Science Association, Philadelphia,September.

Vogel, Steven K. 1996.Freer Markets, More Rules: Regulatory Reform in AdvancedIndustrial Countries. Ithaca and London: Cornell University Press.

Weiss, Linda, 1989. The Myths of the Powerless State, Cambridge: Polity.

Weiss, Linda (Ed.), 2003. States in the Global Economy: Bringing Domestic Institutions BackIn, Cambridge, Cambridge University Press.

Yackee, Jason Webb & Yackee, Susan Webb. 2007. An Empirical Analysis of RegulatoryAgency Output Under the Bush Administration. Unpublished manuscript.

Zylberman, Patrick. 2004. Making Food Safety an Issue: Internationalized Food Politics andFrench Public Health from the 1870s to the Present.Medical History48(1), 128.

1 The International Telegraph Union, the predecessor of the International

Telecommunications Union, was established in 1865.

2WHO Global Strategy for Food Safety, 2002; Available at

www.who.int/entity/foodsafety/publications/general/global_strategy.

David Levi-Faur - Regulatory Capitalism & the Reassertion of the Public Interest.pdf

Documents

Transcript of David Levi-Faur - Regulatory Capitalism & the Reassertion of the Public Interest.pdf